VR Capital hedge fund blocks Naftogaz bond restructuring - FT
MOSCOW. Oct 19 (Interfax) - VR Capital, a hedge fund headed by Richard Deitz, a former co-founder of investment bank Renaissance Capital, is blocking the restructuring of two Eurobond issues by Ukrainian national oil and gas company Naftogaz, the Financial Times reported, quoting sources.
VR Capital "is a big holder of the bonds and has taken a lead role in blocking the plans," the FT report said. The company itself declined to comment.
There are currently three outstanding Naftogaz Eurobond issues, all of which were placed in 2019, including a three-year issue of $335 million placed at 7.375% in July that year; a five-year issue of 600 million euros placed at 7.125% in July with the EBRD buying up a fifth;, and a seven-year issue of $500 million placed at 7.625% in November. The deadline for the redemption of the 2022 bonds and interest payments on them and the 2024 bonds was July 19.
A week prior to that, Naftogaz proposed to defer the redemption of its 2022 bonds and freeze coupon payments on all three issues by two years, capitalizing interest. However, bondholders rejected this proposal, while the government prohibited payment, leading the company to default on two of the three bond issues on July 26.
Only the holders of 2024 bonds agreed at the end of August to a repeat proposal to defer redemption and payments on all bonds, and that was largely due to the EBRD's backing as a bondholder.
Only 43.13% of the votes were cast in support of the proposal to defer payments on the 2026 Eurobonds, the quorum being 54.25%; and only around 22% of the votes on the 2022 issue, the quorum being more than two-thirds.
Naftogaz argued the proposal to defer payments as needing to accumulate additional natural gas reserves for the upcoming heating season, which requires about $8 billion, according to the decision of the Ukrainian government.
VR Capital has said it is a major Western investor in Ukraine with an asset portfolio exceeding $1 billion. The fund has worked actively with Ukraine's debt and has sizeable assets in the Ukrainian renewable energy sector.
VR Global Partners at the end of 2021 lost a case regarding the right of claims against the state-owned railways operator Ukrzaliznytsa under nine loan agreements totaling $196.25 million, which were ceded to the investor by Prominvestbank, and said it would seek a refund through restitution. The National Bank of Ukraine this year ousted Prominvestbank from the market, and it was decided to requisition some of the bank's assets for the state budget.